Target (TGT 2.36%) is one of the best-known retailers in the United States, but it's deeply out of favor on Wall Street. Yet if you are a long-term dividend investor, taking a risk on this stock could help you build a million-dollar portfolio.
How bad is it for Target right now?
When talking about an index such as the S&P 500 (^GSPC 1.03%), which is widely viewed as a proxy for the whole U.S. stock market, a bear market is declared when the index's value declines by 20% from its peak. Over the past year, Target's shares have lost more than 45% of their value. Over the past five years, meanwhile, the shares have lost about two-thirds of their value. Target is, very clearly, in a bear market of its own even as the broader market flirts with all-time highs.
Image source: Getty Images.
That said, because of the mathematics of dividend yields, Target's drastic share price decline has resulted in its yield rising to roughly 5.3%, which is near its highest level in recent history. The yield today is much higher than it was during the Great Recession or the coronavirus pandemic. That's one good reason why dividend investors might want to take a look at Target right now.
Another is the fact that Target is a Dividend King, with more than five decades of annual dividend increases under its belt. A company can't build a record like that without having gone through some bad times and surviving them with its ability to keep steadily rewarding its shareholders intact. That's particularly true given that Target is a retailer, so it operates in a sector that's highly exposed to the effects of swings in the economy.
Target isn't firing on all cylinders
Considering its deep share price decline, it should come as no surprise that Target's business hasn't been performing particularly well recently. In the first six months of 2025, the company's revenues fell by 1.9%, and same-store sales were down by 2.8%. Those are not good numbers for a retailer and help to explain the dour mood among investors about its shares. Meanwhile, peer Walmart has seen strong sales growth.
There's an important difference between these two retailers. Walmart's focus is low prices, which is in line with consumer trends right now. Large numbers of people are trading down to the lowest-priced retailers, a pattern highlighted by the strength of retailers like Dollar Tree, which experienced a massive 6.5% same-store sales jump in the second quarter, and a 3% increase in store traffic.
Target's brand identity among its discount chain peers is centered on offering a more premium experience, so it is out of step with the trade-down trend. Target also is recovering from criticism of its diversity policies that triggered boycotts.
But don't count Target out just yet. Not only has the company survived down periods, but its business could be stabilizing. For example, its six-month drop in sales was 1.9%, but the second-quarter decline was 0.9%. The same trend appeared in same-store sales, which were down 1.9% in the second quarter, which was a lot better than the six-month figure of 2.8%. This basically means that its performance improved as the year progressed, though the trend would probably be best described as having gotten less bad.
If history repeats itself, today's yield could be an attractive opportunity
There is a turnaround opportunity in Target's shares. Adding this depressed stock to a diversified portfolio could give you a leg up on building a million-dollar nest egg. And you would be able to collect the huge yield as well: The company's payout ratio is still fairly reasonable at roughly 52% over the trailing 12 months, so the dividend looks sustainable.
There are clearly risks involved with buying this underperforming and out-of-step retailer. And a business turnaround probably won't happen quickly. But given Target's status as a Dividend King, it seems likely that management will do what's needed to get it back on track. After all, that's exactly what it has done for over five decades at this point.
